Pay TV and Comcast and City Government and State Government and Communications

Cities losing cable power

December 18, 2006

In the last several weeks, cable TV operator Comcast has sent out 26 "Dear John" letters to Indianapolis and other metro-area cities, informing them it has dumped its local cable franchise agreements and gotten hitched to a single, statewide video franchise.

Comcast Corp. is among a dozen video providers in Indiana that have filed for state video franchises. As such, they're no longer required to answer to municipalities when it comes to service complaints, the kinds of public access channels they offer, or how much they should pay to operate in a locality.

The prospect of losing local oversight generated a firestorm among municipalities, video operators and free-market disciples during the last session of the Indiana General Assembly. But it's only now that cable customers are starting to get the picture.

Among the realizations: The Indiana Utility Regulatory Commission, which hands out the video franchises, is toothless when it comes to resolving consumer complaints.

"The IURC only has the ability to grant franchises. It is not empowered to resolve customer complaints regarding cable/video service and rates," states the Web page of the Indiana Office of Utility Consumer Counselor.

"However, the IURC's tracking efforts may identify trends and problems to legislators to consider when reviewing the state's telecommunications laws in the future."

OUCC spokesman Anthony Swinger said the agency has handled a few cable complaints in the five months state franchising has been in effect. All of them have involved broadband and phone service offered by cable firms.

"So far, the companies have worked cooperatively with us to resolve those matters," Swinger said.

Nothing in the legislation compels the OUCC to intervene, however.

No more stick-and-carrot

In Beech Grove, one of the recipients of Comcast's letters, city officials said there's little in the way of leverage left to force the cable company to be consumer-friendly.

"I'm just going to forward complaints to the IURC--the state--and let them handle it," said Tim Showalter, director of communications.

Before, with city attorneys in tow, a municipality could enforce language in its franchise agreement governing complaint resolution.

The Indianapolis Cable Communications Agency over the years dictated a broad array of performance measures and compliance rates, governing everything from installation to service interruptions.

Now, it can take all the Comcast complaints it wants, but it's powerless to force resolution of the issues. The city's other cable provider, Bright House Networks, has kept its city franchise, at least so far.

"The Cable Agency takes in over a thousand complaints each year from both cable operators, with the decided majority coming from Comcast customers," Cable Agency Director Rick Maultra wrote in his most recent report. Comcast serves most customers in Marion County--outside the old city limits territory franchised to Orlando-based Bright House.

Maultra prophesied just such a vacuum in enforcement while HB 1279, the telecommunications reform bill, was being debated in the Legislature last year.

The bill was backed by AT&T, which wanted to avoid striking franchise agreements with hundreds of municipalities across the state when it rolls out cable-like video services via phone lines within the next few years.

"What this essentially allows Comcast is that the local cable franchise agreements continue in perpetuity [financially] while holding Comcast harmless to comply with the FCC customer service standards that we have enforced consistently. Not surprisingly, compliance with the [standards] was not addressed in the state legislation," said Maultra's report.

The architect of HB 1279, Sen. Brandt Hershman, R-Wheatfield, acknowledges that Indianapolis has been able to exert leverage against cable companies.

"I won't dispute that," he said.

More competition the answer?

But the idea of local government leverage in much of the state is "largely an illusion," Hershman added, especially in rural areas where service is often a "take-it-or-leave-it" offering by a big monopoly.

He defends the statewide franchise as a way to streamline entry of competition in the video market and give consumers more choice.

Note, he added, the proliferation of cable TV ads offering special pricing deals on a "triple play" of cable, Internet and phone service.

"The ability of consumers to choose other options is ultimately the best consumer protection," Hershman added.

James and Jane Kahl, who live west of Indianapolis, contacted the Indianapolis Cable Communications Agency after Comcast failed to explain to their satisfaction why canceling some premium channels actually raised their monthly bill.

The city agency got Comcast to call him back, James Kahl figures. Unfortunately, he's still not satisfied with the company's explanation, or with rates he says have soared in the last decade.

"They have to have competition. That's the only way you're going to be able to control prices. They just keep raising rates and just keep laughing," Kahl said.

The 800-pound gorilla of a competitor most anticipated around these parts is San Antonio-based AT&T. The state's big phone service provider beat everyone to the IURC's door last August to file a video franchise.

So far, though, other than a flirtation with on-demand movies via its phone lines, AT&T has yet to roll out its much-vaunted answer to cable TV.

Local executives of Philadelphia-based Comcast declined to elaborate on the switch to statewide franchising.

"Under the new state regulatory framework, applying for a state-issued cable franchise offers us the best opportunity to maintain a level playing field and build on our track record of innovation," said Mark Apple, regional vice president of communications.

As for whether statewide video franchising needs some tweaking to protect customers, time will tell. The OUCC's Swinger noted that the statewide franchise is in its infancy and bears close scrutiny.

Cities still get their fees

Local governments, at least, are to continue to receive the fees they were receiving under their terminated franchise agreements. Indianapolis, for example, would still receive upward of $4 million a year from Comcast based on what the company paid in 2005.

Maultra isn't saying whether the city will go to the Legislature this year to plug holes in the telecom reform act.

"We are still deliberating our legislative strategy and have not made any decisions one way or the other," he said.

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